I am a securities law attorney at Wiand Guerra King in Tampa, Florida, where my practice includes complex commercial litigation and regulatory matters, with a focus on securities and financial services litigation. I am also part of the team representing the court-appointed receiver of Arthur Nadel's $400 million Ponzi scheme, and have particular expertise in the area of Ponzi schemes. In addition to my law degree, I also hold a Masters in Business Administration from the University of Miami. In my spare time, I also publish the Ponzitracker blog, which tracks the proliferation of Ponzi schemes both nationally and internationally. Feel free to follow on Twitter at @Ponzitracker. All opinions expressed are solely that of the Author. This blog is not intended, nor should it be construed, as legal advice.

A Ponzi Schemer Parts With His Silver

It was 2009, and silver prices were booming. After dropping to a multi-year low, prices soon skyrocketed as investors sought safety in a tumultuous economy. Yet most investors could only indirectly participate in the metal’s run, relegated to purchase securities of silver miners or exchange-traded funds (ETF’s) tracking the price of silver. Then, in what sounded too good to be true, a South Carolina company offered investors the opportunity to cash in on the boom by purchasing actual silver bars that would then be kept in storage at a Delaware Depository. The company, Atlantic Bullion and Coin, Inc. (“AB&C”) and its owner, Ronnie Wilson (“Wilson”), proceeded to take in approximately $65 million during the three-year period from January 2009 to February 2012, including $33 million alone from January 2011 to February 2012. Based on prevailing silver prices, this should have translated into the purchase of thousands of 100-ounce and 1000-ounce silver bars held in storage for investors.

5 kg Silver bar (Photo credit: Wikipedia)

However, as authorities would discover in early 2012, the operation was nothing more than a giant Ponzi scheme, with Wilson purchasing “woefully insufficient” quantities of silver and using investor funds to make Ponzi-style payments to create the appearance that the scheme was wildly successful. When Beattie Ashmore, the court-appointed receiver, took over operations in June 2012, he discovered that only eighty-five 1000-ounce silver bars had been purchased since 2009, and of that minimal quantity, only sixty-four bars remained. Additionally, contrary to Wilson’s representations, there was no evidence that he or AB&C had taken possession of any significant quantity of silver bars or that the bars were held in storage for specific clients. Instead, tens of millions of dollars were used for Wilson’s and his family’s personal and/or business interests.

When a receiver is appointed in the wake of a Ponzi scheme such as Wilson’s, one of the immediate priorities is to secure all known and potentially unknown assets to prevent dissipation or further losses. The receiver is then given discretion to manage or maintain the assets, and may then petition the court for approval to dispose of the asset when he/she sees fit. Whether managing a business or maintaining the value of an asset, the overarching goal is to maximize the value of the asset for victims, as victims of Ponzi schemes rarely receive more than pennies on the dollar. The assets recovered in Wilson’s case include silver bars, six vehicles, 13 pieces of art and sculpture, 55 guns, and eleven properties.

In Wilson’s case, Ashmore also took on the role of currency trader. At the time of his appointment, silver was trading for approximately $29 per ounce. After consulting with various experts, Ashmore determined to hold the silver in expectations that prices would increase. In mid-August, after the Federal Reserve began hinting that it would step in again to prop up the US economy, traders began buying up silver, boosting the price of silver to $32 per ounce at the end of August. But Ashmore still did not sell. Then, as the Federal Reserve officially announced its bond-buying program on September 12, prices again shot up, this time touching nearly $35 per ounce. It was then that Ashmore determined to unload the silver, confiding to Forbes that

“we have been watching the silver and gold markets carefully, and our experts advised us to sell.”

In a court filing, Ashmore indicated that “liquidation of the silver holdings at this time is the best course of action to maximize its value,” citing the cost of storing and transporting the silver. That same day, the South Carolina federal court granted Ashmore’s request, agreeing that good cause had been shown to “immediately liquidate those silver holdings.” In a sale held the next day, Ashmore disclosed to Forbes that

“we successfully completed the sale and have recovered $675,000 for the victims…[which is] $75,000 more than the initial appraisal done on the day of Wils0n’s arrest.”

By patiently waiting on the markets, and with the fortuitous timing of the Federal Reserve’s actions, Ashmore was able to unload the silver with a 25% short-term return that is, ironically, usually reserved for the rhetoric of Ponzi schemers. A look at silver prices since Ashmore’s appointment demonstrates this:

credit: Silverprice.org

Wilson agreed to plead guilty last month to two counts of mail fraud, which carries a maximum prison sentence of twenty years per offense and up to a $250,000 fine. A sentencing date has not yet been set, and Wilson remains free on $1 million bond.

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